Income Tax law to be changed to raise penalty, lock funds for ‘welfare of poor’

The government introduced amendments to the Income Tax Act in Lok Sabha on Monday to enable them to impose a higher penalty and tax rate on assessees of unexplained deposits.

By: ENS Economic Bureau | New Delhi | Updated: November 29, 2016 11:47 am
income tax department, it department, demonitisation notes, demonitisation currency, rs 500 ban, rs 1000 ban, 1000 demonitisation, 500 demonitisation, business news Income Tax Department Building. (Express photo by Vasant Prabhu)

Around three weeks after its announcement to withdraw high-denomination currency notes, the government introduced amendments to the Income Tax Act in Lok Sabha on Monday to enable them to impose a higher penalty and tax rate on assessees of unexplained deposits. The Taxation Laws (Second Amendment) Bill, 2016 also proposes to introduce a scheme named the ‘Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY), under which the declarant will have to pay a tax of 30 per cent on the undisclosed income, a penalty of 10 per cent and a surcharge called ‘Pradhan Mantri Garib Kalyan Cess’ of 33 per cent on the tax payable.

In addition to the taxes, penalty and cess, which totals up to around 49.9 per cent, the declarant will have to deposit 25 per cent of undisclosed income in an interest-free deposit scheme called the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. This money, which will be locked-in for four years, will be utilised for irrigation, housing, construction of toilets, infrastructure, primary education, primary health, livelihood, a finance ministry release said. The deposit scheme will be notified by the government in consultation with the Reserve Bank of India.

WATCH VIDEO: Income Tax Law To Be Changed To Increase Penalty On Unexplained Deposits: All You Need To Know

Existing provisions of the I-T Act are also proposed to be amended to enable tax authorities to take penal action for those who do not declare their unexplained credit, investment, cash and other assets.

The Bill proposes to amend Section 115BBE of the I-T Act to levy a tax at a flat rate of 60 per cent plus a surcharge of 25 per cent on the tax (15 per cent of undisclosed income). Also, if the assessing officer determines the income as per Section 115BBE, then a penalty of 10 per cent would be levied, along with the 75 per cent tax and surcharge.

No expense, deductions or set-off will be allowed in the proposed changes to Section 115BBE. The current provision under Section 115BBE allows a flat rate of tax of 30 per cent plus surcharge and cess. The amendments come in the wake of concerns being raised that some of the existing provisions of the Income-tax Act, 1961 can possibly be used for concealing black money.

“It is, therefore, important that the Government amends the Act to plug these loopholes as early as possible so as to prevent misuse of the provisions,” the Statement of Objects and Reasons of the Bill said.

The Bill stated that the declaration opportunity will help the government garner additional revenues, which can be used to undertake activities for welfare of the poor. “In the wake of declaring specified bank notes as not legal tender, there have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.”

According to the Bill, the current provisions for penalty in cases of search and seizure are proposed to be amended to provide for a penalty of 30 per cent of income, if it is admitted, returns filed and taxes are paid. In all other cases, 60 per cent will be the penalty. Currently, the penalty is 10 per cent of the income, if the income is admitted, returned and taxes are paid and 20 per cent, if income is not admitted but returned and taxes are paid. Penalty is pegged at 60 per cent in all other cases.

For under-reporting and misreporting income, the current provisions under the I-T Act will remain unchanged. The existing provisions allow a penalty at 50 per cent of the tax for under-reporting income and a penalty of 200 per cent of the tax for misreporting. Under reporting or misreporting income is normally difference between returned income and assessed income.

Revenue Secretary Hasmukh Adhia said the deterrent provisions were necessary so that people have the fear of hoarding black money. “The disclosures in PMGKY scheme will ensure that no questions will be asked about the source of fund. It would ensure immunity from wealth tax, civil laws and other taxation laws. But there is no immunity from FEMA, PMLA, Narcotics, and black money act,” he said.
Deposits which have been already made from November 10 will be covered under PMGKY. “Last date we will notify after the Bill is passed but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016,” he said.

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  1. B
    Barb Dewyre
    Nov 29, 2016 at 6:58 am
    For the VIDS ending September 30, 2016, Modi had said that this s the final opportunity to declare black money. Now by simply enhancing the penalty by 4.9% he has given them another opportunity. If this was the game plan hen why make the common man go through so much of pain?
    Reply
    1. S
      Srividya Jayaraman
      Nov 29, 2016 at 4:21 pm
      Congress.are looters. May you must also be one. Get lost moron
      Reply
      1. S
        Srividya Jayaraman
        Nov 29, 2016 at 4:19 pm
        Exactly these Aaptard are totally brain washed by Kujiliwal because Ambani and Adani because they are Gujarat. They think only Ambani and Adani are making money but they will not point out about Jindals and.others because some.are.suppotees of Congress.
        Reply
        1. S
          Srividya Jayaraman
          Nov 29, 2016 at 4:12 pm
          Morons like you are only fit to be not even chaiwaalla. I is doing a great job. Gi and kick your old Congi feet.
          Reply
          1. M
            MyTake
            Nov 28, 2016 at 7:06 pm
            Modi has "stolen" many opposition parties "slogans" in broad day light!! Opposition is going to be looked like dead bodies only, without the life!!
            Reply
            1. M
              MyTake
              Nov 28, 2016 at 10:56 pm
              Modi is just using the "pluses" and "minuses" of arithmetics! The money that does not return by December 30, simply will be printed and used for the welfare of the poor! This is g Modification Project in style!!lt;br/gt;lt;br/gt;Don't write Modi off yet!! "Multiplication" and "division" still to be followed through!lt;br/gt;lt;br/gt;Stay tuned!
              Reply
              1. M
                MyTake
                Nov 28, 2016 at 10:59 pm
                Next time the opposition "politicians" will be coming to Parliament na-ked! Modi will rob them of their un-dies! Twenty first century Indian zoo!!
                Reply
                1. M
                  MyTake
                  Nov 29, 2016 at 4:32 am
                  This will cause constipation and not even allow the crooks vomit out what they swallowed! lt;br/gt;lt;br/gt;Only Modi pill can cure them after doing the required prayoschitta!
                  Reply
                  1. M
                    MyTake
                    Nov 28, 2016 at 7:02 pm
                    It is in BJP's interest to "instigate" opposition to fight against Modi Team, which will put on display the character of opposition. It's a silent revolution that is taking place in people's mind that is raising their level of consciousness day by day! Now people will fight Modi's war on his behalf!
                    Reply
                    1. M
                      MyTake
                      Nov 28, 2016 at 6:57 pm
                      More the opposition is opposing Modi, more people are enjoying! It's the real communism! Even the Maoists here are likely to get what they apparently are fighting for and join Modi to fight the crooks in their divine transformation!lt;br/gt;lt;br/gt;This demonitisation attempt is likely to go into the text books of Univerities and is going to be studied deeply in days to come. Result will be analysed for better implementation of the schemes in countries around the world!
                      Reply
                      1. M
                        MyTake
                        Nov 28, 2016 at 6:38 pm
                        Now the opposition can not say they don't want the welfare of the poor and keep fighting with Modi! lt;br/gt;lt;br/gt;Fight with Modi will be automatically deemed fighting against the poor!
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                        1. M
                          MyTake
                          Nov 28, 2016 at 6:52 pm
                          PM's initiative to get houses for the poor by 2022 will get a boost from demonitisation initiative.
                          Reply
                          1. M
                            Myrake
                            Nov 28, 2016 at 6:45 pm
                            Fight against Modi is more of fight against the poor and the have nots! lt;br/gt;lt;br/gt;Modi will put the crooks inside the "pressure cooker" letting people watch them completing their Prayoschitta! Now these crooks are going to behave like fish out of water!!
                            Reply
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                              Piyush
                              Nov 29, 2016 at 2:52 am
                              You have to pay 50% tax but the way s no immunity from narcotics law..u get capital punishmnt for being heroine smuggler
                              Reply
                              1. R
                                Rajesh
                                Nov 28, 2016 at 6:43 pm
                                BJP before fooled people of the country in the name of Ram Mandir for power, then they ruled in Gujarat via Gujarat Riots for decades. After their Dalit flogging, Lynching, communalism failed to get them votes they are fooling the under educated and uneducated in the name of Demonetisation Scam.
                                Reply
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                                  Sanat
                                  Nov 29, 2016 at 6:08 am
                                  FEKU gang did mive land deals using currency just before the demonetisation.
                                  Reply
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                                    Dooga
                                    Nov 29, 2016 at 2:46 am
                                    This might just incentivize unscrupulous tax officials to ask for more money when they visit small businesses...their cut will be higher now. lt;br/gt;These measures will work only when there's less discretionary power with taxmen, more transparency in taxation and higher penalties that get enforced for taxmen trying to extort money
                                    Reply
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                                      Benaami
                                      Nov 28, 2016 at 10:06 pm
                                      Democracy means , NOT to become FAN of any leader because if you become fan of any leader then you lose your all power of questioning him for his any wrong doings. Therefore he invented the term "Bhakt", means his worshippers by using social media like whats app and twitter by appointing IT information people, to kill the democracy and to become a dictator. What he did is he projected his main opposition leaders Rahul and Arvind as a useless people by bombarding everyday negative about them. It's obvious that if you talk daily for a year negative about someone then your suppose the get brain washed and have the negative impression about them. He has given so many fake promises during the election and then when he knew that he can't fulfill it , he asked his t Mr. Shah to call them as Jumla on TV. The reason why educated people vote him because they think better to vote him than those useless people of opposition and the poor people vote in hope to get 15lacs in their bank account.
                                      Reply
                                      1. I
                                        Indian
                                        Nov 28, 2016 at 6:40 pm
                                        Hahahahah.. I knew it this corrupt Modi will bring another Fair and Lovely scheme to help convert Black to White.lt;br/gt;lt;br/gt;All the poor Bhakts who have lecturing about "Surgical Strike" needs brain surgery now
                                        Reply
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                                          ashok s
                                          Nov 29, 2016 at 1:57 am
                                          Above will be money bill or finance bill?
                                          Reply
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                                            ashok s
                                            Nov 29, 2016 at 12:56 am
                                            By this act govt encourages take or make black money and part with us half of that . great idea
                                            Reply
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